Part VII International Securities, Including Markets and Clearing Systems, 20 Global Custody

2021 ◽  
Author(s):  
Yates Madeleine
Keyword(s):  
Financial Markets ◽  
Balance Sheet ◽  
English Law ◽  
International Securities

This chapter draws attention to the service of custody, which in the context of the financial markets, is generally understood as an arrangement in which one entity agrees to hold securities on behalf of a custody client. It reviews the intention of custody, which is for the custody client to remain the owner of the securities and that the securities remain on the custody client's balance sheet. It also describes the service of custody in the matter of English law, in which securities may be held by a custodian as bailee or trustee and will not be available to creditors of the custodian. This chapter talks about the custody aspect of the services provided by Clearstream and Euroclear that falls under the Luxembourg law and Belgian law, respectively. It also mentions the escrow arrangement, in which the escrow agent may hold securities on behalf of one or both parties to the escrow agreement.

The non-linear effects of the Fed asset purchases

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Alessio Anzuini
Keyword(s):  
Financial Markets ◽  
Large Scale ◽  
Balance Sheet ◽  
Monetary Economics ◽  
American Economic Review ◽  
Vector Autoregressive ◽  
Portfolio Balance ◽  
State Dependent ◽  
Linear Effects ◽  
Asset Purchases

Abstract The Federal Reserve responded to the great financial crisis deploying new monetary policy tools, the most notable of which being the expansion of its balance sheet. In a recent paper, Weale, M., and T. Wieladek. 2016. “What Are the Macroeconomic Effects of Asset Purchases?” Journal of Monetary Economics 79 (C): 81–93 show that the asset purchases were effective in stimulating economic activity as well as inflation and asset prices. Here I show that their results are state dependent: large scale asset purchase are effective only when financial markets are impaired. Financial markets are under stress when the effective risk-bearing capacity of the financial sector is drastically reduced, i.e. when the excess bond premium (EBP) of Gilchrist, S., and E. Zakrajšek. 2012. “Credit Spreads and Business Cycle Fluctuations.” The American Economic Review 102 (4): 1692–72 exceed a certain threshold. Using an estimated threshold vector autoregressive model conditional on the EBP regime, I show that an increase in the balance sheet has expansionary effects on GDP and inflation when EBP is high, but not when it is low (as its effects become mostly insignificant). I argue that the high EBP can be interpreted as a proxy of market dis-functioning so that only when this channel of transmission is on, the unconventional policy is particularly effective. This suggests that models of transmission of unconventional policies, based on asset purchases, should focus also on the market functioning channel and not only on the portfolio balance one.

scholarly journals A SUNSPOT-BASED THEORY OF UNCONVENTIONAL MONETARY POLICY

2020 ◽  
pp. 1-32
Author(s):  
Roger E. A. Farmer ◽  
Pawel Zabczyk
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Rational Expectations ◽  
Balance Sheet ◽  
Unconventional Monetary Policy ◽  
Efficient Outcome ◽  
Complete Set ◽  
Pareto Efficient ◽  
Financial Securities

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet. We construct a general equilibrium model where agents have rational expectations, and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank’s balance sheet affects equilibrium asset prices and economic activity. We prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is self-financing and leads to a Pareto efficient outcome.

Renting Balance Sheet Space: Intermediary Balance Sheet Rental Costs and the Valuation of Derivatives

2020 ◽  
Vol 33 (11) ◽  
pp. 5051-5091 ◽  
Author(s):  
Matthias Fleckenstein ◽  
Francis A Longstaff
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Balance Sheet ◽  
Futures Market ◽  
The Other ◽  
Capital Regulation ◽  
Debt Overhang ◽  
Interest Rate Futures ◽  
The Interest Rate ◽  
The Cost

Abstract A long-standing asset pricing puzzle is that the funding rates in derivatives contracts often differ from those in cash markets. We propose that the cost of renting intermediary balance sheet space may help resolve this puzzle. We study a persistent basis in what is arguably the largest derivatives market, namely, the interest rate futures market. This basis is strongly related to exogenous measures of intermediary balance sheet usage and proxies for the balance sheet costs imposed by debt overhang problems and capital regulation. These results extend to the cash derivatives bases documented in many of the other largest financial markets.

Any US Fed balance sheet unwinding may be disorderly

2020 ◽  
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Target Range ◽  
Treasury Bills ◽  
Content Type ◽  
Treasury Securities ◽  
The Us ◽  
Repo Rate ◽  
The Interest Rate

Subject US Federal Reserve policy. Significance The US repurchase agreement (repo) rate, the interest rate on overnight loans backed by Treasury securities to facilitate a range of transactions, suddenly soared above 5% on September 15, 2019. There were immediate effects across financial markets, but the Federal Reserve (Fed) quickly bought up Treasury bills and the repo rate returned to the Fed’s 2.00-2.25% target range. However, concerns linger about whether a spike could recur. The Fed has increased its balance sheet by more than 10% since September but sees this as a temporary adjustment rather than a policy change. Impacts Having narrowed to 3.7 trillion dollars by August 2019, the Fed’s balance sheet could pass its 4.4-trillion-dollar record this year. The Fed will seek to ensure its has enough resources for corporate-tax payment dates but without increasing its holdings indefinitely. Increasing the size of the Fed’s balance sheet could limit the effectiveness of further balance sheet expansion in a future crisis.

Farm income and output and lending by the farm credit system

2017 ◽  
Vol 77 (1) ◽  
pp. 125-136 ◽  
Author(s):  
Denis Nadolnyak ◽  
Xuan Shen ◽  
Valentina Hartarska
Keyword(s):  
Real Estate ◽  
Financial Markets ◽  
Fixed Effects ◽  
Balance Sheet ◽  
State Level ◽  
Farm Income ◽  
Full Time ◽  
Data Set ◽  
Content Type ◽  
Rural Financial Markets

Purpose The purpose of this paper is to provide evidence of the positive impact of the FCS lending on farm incomes which should be useful to policymakers as they consider reforms and further support for this 100-year-old major agricultural lender. Design/methodology/approach The authors construct a panel for the 1991-2010 period from the FCS financial statements and evaluate how lending by the FCS institutions has affected farm incomes and farm output. The authors use fixed effects estimations and control for credit by other agricultural lenders as well as the stock of capital, prices, and interest rates. Since previous work suggests that rural financial markets are segmented and the FCS serves larger full-time farmers with mostly real-estate backed loans, the authors evaluate the impacts of farm real-estate backed loans and of short-term agricultural loans separately for a shorter period for which the data is available. The authors also perform robustness checks with alternative estimation techniques. Findings The authors found a positive association between credit by the FCS institutions and farm income and output. The magnitude of the estimated impact is larger during the 1990s than in the 2000s. Research limitations/implications The positive link between the FCS institutions’ credit and farm incomes and output supports the notion that the FCS lending was beneficial to farmers. The evidence also supports the segmentation hypothesis of rural financial markets. The financial reports data for 1991-2010 are from the ACAs and FLCAs aggregated on the regional level because there is no clear way to classify FCS lending to a more disaggregate level like the state. The authors also assemble and analyze a state-level data set that contains state-level balance sheet data for the period 1991-2003. Originality/value The authors are not aware of another work that directly links (real estate and non-real estate) credit by FCS institutions to agricultural output and farm incomes.

scholarly journals Second Thoughts About Central Bank Digital Currencies

2021 ◽  
Vol 9 (1) ◽  
pp. 1
Author(s):  
Arto Kovanen
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
Balance Sheet ◽  
Modern Society ◽  
Central Banks ◽  
Settlement Systems ◽  
Digital Currency ◽  
Credit Risks ◽  
Institutional Structures ◽  
The Status

Sustained decline in central banks’ monetary liabilities (reserves and currency in circulation), which the emergency of cryptocurrencies may have hastened, has been enabled by technological innovations that over time have allowed financial institutions and their customers to execute transactions and settle their debts without resorting to central bank currency. Policymakers are concerned about their ability to guarantee public’s access to government-backed currency. This has implications for central banks’ balance sheet and income position, which central bank digital currency might reconstitute. But the introduction of central bank digital currency (CBDC) comes with its own risks and could be disruptive for financial markets. We believe that retaining the option to have access to government-guaranteed currency is of utmost importance, despite the sporadic demand for physical currency in the modern society, but it could be addressed within existing institutional structures without the introduction of CBDC. However, policy authorities are right in seeking oversight and regulation for cryptocurrencies to address the destabilizing potential of cryptocurrencies for financial markets, and they should continue modernizing payment infrastructures to bring retail settlement systems at par with cryptocurrencies in terms of settlement speed but without associated liquidity and credit risks. These steps would preserve the status quo and allow private sector to continue innovating while limiting central banks’ footprint in the financial markets.

VOLATILITY SPILLOVER EFFECT OF FEDERAL RESERVE’S BALANCE SHEET ON THE FINANCIAL AND GOODS MARKETS OF INDO-PAK REGION

2019 ◽  
Vol 14 (03) ◽  
pp. 1950015
Author(s):  
QASIM RAZA SYED ◽  
WASEEM SHAHID MALIK ◽  
BISHARAT HUSSAIN CHANG
Keyword(s):  
Financial Markets ◽  
Federal Reserve ◽  
Balance Sheet ◽  
Spillover Effect ◽  
Spillover Effects ◽  
The Other ◽  
Volatility Spillover ◽  
Monthly Basis ◽  
Volatility Spillovers ◽  
Volatility Spillover Effect

This paper examines the volatility spillover effect of the balance sheet of Federal Reserve (Fed) on the financial and goods markets of Pakistan, India and Bangladesh (collectively known as the Indo-Pak region). Diagonal BEKK-GARCH methodology is used to capture the volatility spillover effects on Indo-Pak economies. This study took data from the year 2004 to year 2019 on a monthly basis. The findings of the paper describe that there are volatility spillovers from Fed’s balance sheet to the financial markets of Pakistan, India and Bangladesh economies. On the other hand, there is also evidence of volatility spillovers from the balance sheet of Fed to the goods markets of these economies.

EMI Group PLC

2017 ◽  
pp. 1-19
Author(s):  
Michael J. Schill ◽  
Elizabeth Shumadine
Keyword(s):  
Financial Markets ◽  
Dividend Policy ◽  
Balance Sheet ◽  
Financial Policy ◽  
Digital Audio ◽  
Beach Boys ◽  
Pink Floyd ◽  
British Music ◽  
Corporate Financial Policy ◽  
The Right

This case examines the April 2007 decision of British music company EMI to suspend its annual dividend as the company struggled to respond to the effect of digital audio distribution on its core business. The EMI case is intended to serve as an engaging introduction to corporate financial policy and themes in managing the right side of the balance sheet. The case contrasts EMI's storied success with artists such as the Beatles, the Beach Boys, Pink Floyd, and Norah Jones with its recent inability to succeed in financial markets. In light of takeover threats and restructuring costs, EMI's CFO Martin Stewart must recommend EMI's dividend policy.

scholarly journals The Influence of Internal Contradictions in the Us Economy on Global Financialization and the Expansion of Fictitious Capital

2021 ◽  
Vol 25 (2) ◽  
pp. 6-34
Author(s):  
D. A. Dinets ◽  
R. A. Kamaev
Keyword(s):  
Financial Markets ◽  
Global Economy ◽  
Capital Investment ◽  
Balance Sheet ◽  
The United States ◽  
Market Liquidity ◽  
Financial Flows ◽  
Us Economy ◽  
Fictitious Capital ◽  
The Us

The financialization genesis of the global economy centered in the United States is on the bifurcation point now— a fictive capital’ expansion is damaging with the social capital regeneration mechanism disaster. The method of identifying and estimating the fictive capital’ extension is absent for now. The fictive capital exists as a metaphor on the science papers but not as an institutional basis of the capital flows directions. The paper aims to update the configuration of the global financial system, its dependence on the performance of US corporations and banks; to identify the sources of vulnerability of world finance and global liquidity from the fictitious capital of American financial markets. The methodology is theoretical pattern’ of financial capital movements and its real statistical market indicators comparison. The empirical base is statistical data about the financial flows and financial results especially about the US as a global financial center. Based on the results the authors have revealed an origin of fictive capital on the US bank sector by the justification for the conclusion of liquidity above the profitable as the purpose of financial operations. This conclusion is confirmed with the scale of off-balance sheet transactions of banks. Besides the regression between the prices of derivative’ basis assets and stock indexes has been shown. Also, the market capitalization of American companies is not sensitive to change in market liquidity indicators. The authors concluded that global financialization is supported by significant internal contradictions in the US economy. The source of contradictions is the financial mechanism for withdrawing liquidity from the sphere of production and circulation into the sphere of financial markets. Capital investment using instruments of the US financial market entails the threat of losing their liquidity. Forecasting the dynamics of the global economy without taking into account the role of fictitious capital, which is emerging in the American financial markets, leads to global vulnerability and may cause the next financial crisis.

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